The Turkish economy is actually quite good. The size of the unreported or black market economy makes Turkey reasonable stable. Despite the very volatile political situation that has been developing over the past year, the Turkish Lyra spent most of the fall being one of four currencies rising against the year. However, there are hiccups form time to time.
When I moved to Turkey the Lyra was trading for 1.41 against the dollar. One month ago it was at 1.16. Today it’s at 1.24. Despite the bumpy ride, things seem to calm down. Since the financial crisis of 2000 where the Lyra lost half its value over night, things have been pretty good. A lot of people lost a lot of money during this crisis, however many with close ties to the government coincidently sold everything they had and invested in foreign currency weeks or days before the crash (according to my friends). Some people think another crisis is coming (SeekingAlpha.com) which may contribute to the recent volatility. People remember what happened and are afraid it will happen again. Despite a GDP growth rate of 5.1% and single digit unemployment (according to the CIA world fact book), people still don’t have much faith in the economy. All the major banks here in Turkey allow you to easily open your own foreign currency account online for no charge. I currently have four accounts and am considering opening a fifth, adding a fourth currency to my list. A lot of business is done in Euros in Turkey as well, including my own company’s. We buy and sell everything in Euros as a way of making our pricing structure more stable.
Just after the markets closed on Friday March 14th, a case was brought against the ruling AKP (justice and development party) party here in Turkey. They were brought up on charges of anti-secularism (that’s illegal here in Turkey) and will be investigated by a special court on whether or not they have violated the secular laws of Turkey’s constitution. This is not the first time that a government has been brought up on charges of being anti-secular, and if the party is dissolved, it will not be the first time that a government has been removed from power for such a violation. Naturally Monday morning, when the markets opened, things got crazy.
Two months ago I moved most of money to Euros at around 1.7-1.75 Lyra to the euro. On the 14th when the markets closed, things were around 1.85. On Monday, by noon, the Euro broke 2 Lyra (I sold everything). When things closed one week later on the 21st, the Euro was at 1.917. My speculation clearly paid off. Despite the ongoing case against the government (which again, is widely unpopular among the educated upper and middle class), the economy seems to be doing alright (Turkish Daily News Article).
So now that things have calmed down for the time being, what will I do with the windfall I received from this speculation. It’s not too much so probably I am just going to buy a round for my friends. More likely though, I will do my best to speculate against the outcome of this court case. If the government is removed - which by the way has control of the executive branch as well as most of the parliament - I am sure things will get crazy again.
Cheers.
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March 23rd, 2008 at 12:26 pm
Greetings . . . .
Cam across your blog by a lucky accident. Am interested in any/all info about Turkey. Reason: I am a retired management consultant (and part-time travel writer) although neither among the rich or famous, I have always sought to put my relatively meagre capital to work either in high interest government bonds, or time deposits. Thus far, the Turkish time deposit route has served me well, despite the interest rate at 25% of about 2 1/2 years ago declining to its present 14% +. after taxes.
Two questions: over the short, medium and/or long term, how do you see the rate of exchange? Similarly, how do you see time deposit and bond rates over said terms?
Another question: what brought you to Istanbul? It might be probably my second favorite city after Buenos Aires if it wasn’t for the smoke. The two cities have the most dedicated smokers in the world, or how it seems to me, but a miracle happened in B.A. when indoor smoking was banned. Could that possibly ever happen in Istanbul?
Lastly, how long have you been there and how are you enjoying life in that bustling city?
My best regards,
David Gellman
April 1st, 2008 at 9:01 pm
Hi David,
Wow, those are some heavy economic questions that I don’t feel qualified to answer those questions. My blog is about Turkish culture, not economics. What I can tell you that things are very volatile right now until this pending court case about removing the government for being anti secular is resolved.
I came to Istanbul to work with a friend from university. I am in charge of foreign sales for a manufacturing company.
I also don’t like the pollution and the over crowdedness of the city. Too many people, too many cars, too much traffic. Other than that I love the city! Istanbul is a wonderful and charming city, but it is far more expensive than I remember it being when I visited here 5 years ago.
As for the smoking ban, I think it is on its way. My friends said they are going to enact that law this year, but I haven’t checked into it.
In general about the economic thing. Because things are so bad right now. One euro gets you more than two lyra. The general opinion is that this is not what the exchange rate should be at and that it i going to calm down once the pending court case is settled.
Regards,
Conrad
April 9th, 2008 at 11:54 pm
On a side note, one of my friends read this entry and said that it was funny that I make Turkey’s economic situation sound positive. I will reiterate that the volatility in the Turkish economy makes things not so good for everyone. Generally, the economy is growing, but it is unpredictable and unstable. When I wrote this, I was happy about making some money of this instability.